When greed Is good

Recently, we published a piece about Bernie Madoff. Essentially, the point was that it wasn’t greed that motivated him — he didn’t make a penny from his Ponzi scheme — but rather pride and hubris. The story was generally well received, but some chose to zero in on whether or not greed was a good thing or not. While I think such a discussion missed the larger point I was trying to make, it doesn’t mean that the topic isn’t worth talking about. Greed in the news There may be no better example, fresh in investors’ minds, of destructive corporate greed…

You can continue reading this story now by entering your email below

You’ll also get all our free premium research including:

What’s next for bank shares, including which one to buy, and crucially, which ones to avoid.

How to cash in on some of the hottest stocks on the ASX.

Some of the best fully franked dividend shares to buy now.

Cheap and good small-cap stocks that are flying under the radar of the professionals.

Recently, we published a piece about Bernie Madoff. Essentially, the point was that it wasn’t greed that motivated him — he didn’t make a penny from his Ponzi scheme — but rather pride and hubris.

The story was generally well received, but some chose to zero in on whether or not greed was a good thing or not. While I think such a discussion missed the larger point I was trying to make, it doesn’t mean that the topic isn’t worth talking about.

Greed in the news

There may be no better example, fresh in investors’ minds, of destructive corporate greed than the recently revealed behaviour of Chesapeake Energy (NYSE: CHK) CEO Aubrey McClendon. First we found out that he had taken out enormous loans to take part in a company perk, and that those loans created a situation where his interests were not aligned with shareholders’.

Then, after McClendon announced that he would be stepping down as chairman of the board of directors, Reuters broke a story claiming that he had run a secret hedge fund for four years, trading the very commodities Chesapeake produces. Furthermore, Reuters quoted a former trader for the hedge fund, who said that McClendon “engaged in ‘near daily’ communications and ‘exhaustive’ calls to help direct the fund’s trading.”

Unlike Madoff, McClendon earned fees and a cut of profit from the hedge fund.

And McClendon wasn’t alone in these dealings. SandRidge Energy (NYSE: SD) CEO Tom Ward was once the COO of Chesapeake and is the company’s co-founder. He, too, had a hand in running the hedge fund that McClendon is taking so much heat for.

Either way, it seems these two men have put their own, short-term interests front and centre, instead of serving those that they’re supposed to: employees, customers, and — most notably — shareholders.

When greed is goodWhen we say “greed,” it can mean a host of different things to different people. Most dictionaries would define it as “an excessive desire for power or wealth.”

But I would actually argue that there’s a continuum of greed. On one end, we have “short-term greed.” This is the type of greed I usually think of in a negative light, because it blinds the holder from seeing long-term consequences, both to him/herself and to others. McClendon and Ward might well be guilty of this.

But on the other hand we have “long-term greed.” I think more positively of this term, as it connotes a desire to win steady, long-term success through pro-social behavior that benefits all stakeholders.

Amazon.com (Nasdaq: AMZN) CEO Jeff Bezos is famous for playing the long-term greed game. He is now in his second round of forgoing short-term profits in an effort to cement his company as No. 1 in customer service. The company is currently spending billions of dollars to build out fulfillment centres across the US to improve delivery time to customers.

Starbucks (Nasdaq: SBUX) and Costco (Nasdaq: COST) are two other favorite examples of long-term greed. Both companies have generous compensation plans for their employees. When Wall Street has clamored for them to change the pay and benefits of rank-and-file employees — especially during the Great Recession — both declined.

Though it would be nice to think that Howard Schultz and Jim Sinegal, the respective CEOs who put these policies into place, were just being altruistic, that wouldn’t show the whole picture. Sinegal once stated, “We want to be here 50 years from now … [and] taking care of your own people” is one of the pillars for long-term success.

Since we live in a democratic society, people vote with their feet — that goes for shareholders, customers, and employees. If you want to succeed over decades, you’d better be able to satisfy all three of these groups.

Foolish bottom line

I wouldn’t say this puts me in the same company as Gordon Gekko, but I do believe that there’s scant difference between the behaviour of someone hoping to promote long-term pro-social behavior and someone who is long-term greedy.

Of course, there are a thousand shades of gray between these two extremes, but from where I sit, the more long-term greed we have, the better.

If you’re looking in the market for some high yielding ASX shares, look no further than “Secure Your Future with 3 Rock-Solid Dividend Stocks”. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, written by Brian Stoffel, originally appeared on fool.com

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Free report names the 3 dividend shares The Motley Fool's crack team think you should buy now for 2019 and beyond.

Sign up now for instant access to your copy of this free report.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe at anytime. Please refer to our Financial Services Guide (FSG) for more information.

This Service provides only general, and not personalised financial advice, and has not taken your personal circumstances into account. The Motley Fool Australia operates under AFSL 400691. For more information please see our Financial Services Guide. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. The Motley Fool Australia does not guarantee the performance of, or returns on any investment.